HC Deb 02 July 1979 vol 969 cc901-3
25. Mr. John Fraser

asked the Secretary of State for Trade what he estimates to be the total effect on the retail price index of the recent increases in VAT and minimum lending rate and the termination of the Price Commission.

The Minister for Consumer Affairs (Mrs. Sally Oppenheim)

I agree—for once—with previous statements made by the former Secretary of State for Prices and Consumer Protection that changes in the MLR had no direct effect on inflation. As the hon. Gentleman is aware, the Price Commission had little effect on inflation. The most generous estimate that can be made is that it restrained inflation by one-tenth of 1 per cent. on the retail price index.

The effects of VAT changes were given in the Chancellor's Budget Statement.

Mr. Fraser

Does the right hon. Lady disagree with my estimate that the rate of inflation will have doubled by January 1980 and, therefore, that she will be one of the most expensive Ministers for Consumer Affairs so far?

Mrs. Oppenheim

The hon. Gentleman has drawn attention to an important matter. The retail price index inherited by this Government was totally unrepresentative of the true rate of inflation that was in the pipeline. There were a whole raft of price increases which took place after the election but which were in the pipeline before the election. Those increases give the lie to the persistent optimistic forecast that was made by Labour Ministers about the likely course of inflation.

Mr. Bruce-Gardyne

Has my right hon. Friend calculated how many jobs that would have been destroyed by the continuation of the Price Commission will now not be destroyed? In addition, has she calculated how many investment-creating future jobs that could not continue under the politically motivated activities of Mr. Williams and his friends will now continue?

Mrs. Oppenheim

I am reluctant to make such calculations in advance. However, my hon. Friend is right to draw attention to the fact that, undoubtedly, there will be fewer jobs lost and more investment made as a result of the policy.

Mr. Ioan Evans

What representations has the right hon. Lady made to the Chancellor of the Exchequer about the increase of the MLR to 14 per cent., the increase of VAT to 15 per cent., the increase in food prices as a result of the negotiations in Brussels and the increase in petrol prices? Does she not believe that there should be a Minister to deal with consumer protection, because the present Department is doing nothing about it?

Mrs. Oppenheim

The only representation that I have made to my right hon. and learned Friend the Chancellor was to underline his point that the effect on the retail price index of the increases in VAT in the Budget is considerably less than the effect on the RPI of the increases in the first three Budgets of the last Government. I congratulated him upon that matter as well as upon the fact that he reduced income tax by 3p in the pound while his predecessor increased direct taxation by 5p in the pound.

Mr. Hordern

Is it not the case that the Price Commission had no beneficial effect on the course of inflation during the period of office of the last Government? The steps taken by the Chancellor in putting up the MLR and the other proposals have strengthened sterling to such an extent that inflation is highly unlikely to be anything like the rate that is proposed in the official and financial estimates.

Mrs. Oppenheim

My hon. Friend is right to draw attention to the pent-up inflation in the pipeline that resulted from the public sector borrowing requirement being out of control under the last Government. My right hon. and learned Friend the Chancellor had to take adequate steps to put the matter in order—otherwise inflation would have been running even higher by the end of the year.

Mr. Heffer

All the authoritative sources state that inflation will be running at 20 per cent. by the end of the year. In view of the statement made by the right hon. Lady, do the Government intend to fiddle the index in order to try to make out that it is not as bad as it is?

Mrs. Oppenheim

I sympathise with the hon. Gentleman in his desire not to see over-optimistic forecasts made about inflation. There were all too many of those under the last Government, and consumers were consistently misled by them. To the second part of the hon. Gentleman's question my reply is "Certainly not".